Blog

Houses and units inherently show a qualitative bias; their value is influenced by various factors such as size, state of repair, architecture, attributes such as number of bedrooms and bathrooms and whether the home has value-added components such as a pool.

The value of vacant land, on the other hand, is primarily influenced by geographic context and land area. Sure, other factors, such as the council zoning and the shape of the land parcel, can affect value, but compared with a dwelling, it is much easier to quantify and compare land values across regions.

A simple way to do this is to use median land prices, but a median land price only shows the typical price for which a block of land sells. This measure takes no account of how big or small the block of land is. A much better way to measure the value of land is based on a rate per square metre. Using the median land price measure shows Sydney has the most expensive land market in the nation. Based on sales over the past 12 months, the typical Sydney block sold for $283,500.

Using a rate per square metre measure, it is a different story.

On this basis, Perth is the most expensive vacant land market with the typical vacant block selling for $555 a sq m.

Sydney is the second most expensive market at $547 a sq m and, surprisingly, Adelaide is the third most expensive at $486 a sq m, despite having the second most affordable median sale price. The difference comes down to the size of the blocks sold. The median area of vacant land sales in Adelaide is the smallest of any capital city at just 375sq m.

So despite being the most affordable mainland capital city based on median prices, on a rate per sq m basis, Adelaide land is relatively expensive.

Conversely, the most densely populated capital city, Sydney, still has the third-largest median land area across the major capitals at 544sq m.

From a development perspective, why not reduce the typical land area to maximise the development yield and improve housing affordability?

The reason probably comes back to the constraints of council zoning and town-planning regulations.Smaller lots and smarter housing design are a fairly straight-forward mechanism to combat housing affordability and improve density around primary work nodes and transport corridors.

The trend towards smaller lots is evident across all capital cities, but not to the same extent that small-lot housing has been embraced in Adelaide.

The important part of shrinking lot sizes to make housing more affordable is to ensure there are enough parks and recreational facilities nearby.